How to Sell Stock on Ex-Dividend Day

Dividends can provide a valuable source of portfolio income.

Dividends can provide a valuable source of portfolio income.

Dividends are cash payments to shareholders of a corporation. Because publicly traded shares change hands several times over the course of a year, companies use reference dates to determine who is entitled to a dividend. If you own the stock on the record date, you are entitled to a dividend. If, however, you buy the stock on or after the ex-dividend date, you will not receive a dividend. Keeping track of these dates and selling the stock immediately after you become entitled to receive a dividend will result in the fastest possible cash flow while still giving you dividend rights.

Determine the ex-dividend date. The ex-dividend date is the first day on which a shareholder can sell her stock without losing her dividend rights.You can usually find the ex-dividend date by searching for past news about your stock on a finance portal, such as Yahoo Finance or Google Finance. Another way to find the ex-dividend date is to contact the investor relations department of the stock's issuer. If only a dividend record date is available, simply go back two business days from the record date to find the ex-dividend date. Assume, for example, that the record date is Monday, Feb. 10. The ex-dividend date would be Thursday, Feb. 6.

Place a sell order for your stock on the ex-dividend date. You can wait for regular market hours, which is the 6.5-hour uninterrupted time-span between 9:30 a.m. and 4 p.m. in the United States, or sell your stock before the market opens in what is known as pre-market trading. Similarly, you can sell your shares after the market closes in "after-hours trading" following the official close of the market at 4 p.m.. As long as the sale date is the ex-dividend date or a later date, you will be entitled to receive a dividend from the issuing firm.

Check your trade confirmation to ensure that the stock sale has gone through. Keep in mind that if you place a limit order, the sale may not go through. If, for example, the lowest price you will accept as per your order is $11 and the stock trades between $10 and $10.90 throughout the day, you will not be able to sell your holdings. Therefore, if you absolutely must sell the stock on the ex-dividend date and recoup the cash, place a realistic order. If the market price suddenly moves down and what was previously a realistic limit order is now out of the stock's probable trading range, revise your order by lowering your limit price to ensure a sale.

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